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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
It’s a speech that still reverberates. Six months ago Canadian Prime Minister Mark Carney sketched out a vision of a world order with coalitions of middle powers no longer relying on a US anchor. Every government since — not least Canada itself — has been trying to work out what that actually means.
Even before Donald Trump raised geopolitical tensions, governments frequently oversold routine bits of trade policy as having strategic import, and now they’re really at it. When the EU and India agreed a rather shallow trade deal back in January, it supposedly reflected the coming together of two great strategic powers united by a common geoeconomic purpose, and so on. You know the drill.
Now, as it happens, some security agreements were also concluded between the EU and India. But trade agreements are neither necessary nor sufficient for that. The famous Australia-UK-US (Aukus) submarine and technology pact, announced in 2021 to great fanfare, had nothing to do with trade as such.
The instinct of bureaucrats and public international lawyers, who are drawn to overarching systems of rules like wildebeest to a waterhole, is to try to adapt multilateral arrangements like the World Trade Organization or replace them with others. This is an inadequate response for two reasons.
The obvious one is the lack of consensus to get substantive deals through multilateral institutions. Some governments are striving to put a plurilateral agreement on digital and data trade under the aegis of the WTO, for example, defying India, which always blocks such things. But even if they do succeed, it really doesn’t contain strong enough commitments to control or direct the growing thicket of internet regulation.
The more subtle one is that not much in a traditional preferential trade agreement addresses the salient issues of geopoliticised value networks. Preferential agreements are instruments for commercial peacetime based on tariffs, regulations, intellectual property and the like. They don’t work well in a trade war and they haven’t stopped China using a wide range of tools to establish strategic dominance.
To be clear: the vast bulk of actual goods trade is likely to continue unabated, and what trade deals do get through will facilitate that at the margin. But they will not address bottlenecks and vulnerabilities.
The EU, for example, has long been trying to negotiate some kind of docking mechanism with the Asia-Pacific CPTPP group of countries. So far it has essentially only achieved a milk-and-water statement at the meeting of WTO ministers in March. But the highest ambition that’s even vaguely realistic is some harmonisation of rules of origin to allow supply chains to be built more easily between Asia and Europe that bypass China. Even if they got that, so what? The likelihood that this will significantly undercut low-cost Chinese-dominated production networks is very small. And it will do nothing to threaten the leverage that comes from China’s control of certain critical minerals, notably rare earths, and its dominance of strategically important technologies.
For middle powers or anyone else to challenge these sources of influence will require narrower but much deeper bespoke agreements of production, distribution and exchange. This is the gap Carney’s middle-power alliances are supposed to fill. But in reality, many midsized powers — Pakistan, Indonesia, Malaysia, probably Brazil, and many more — are too close to the Chinese economic orbit or too suspicious of advanced-economy governments to form alliances from which they can’t be extracted by threats or inducements by Beijing.
Earlier this week I mentioned the Clean Technology Partnerships Initiative and its plan for the EU to increase production of strategically significant green tech through agreements with other countries. It’s notable that it proposes a range of public-private tools well beyond a traditional trade deal, including procurement agreements, equity stakes and joint ventures. It’s also striking that most proposed partners — Japan, South Korea, Canada, Australia — are like-minded rich democracies already broadly strategically aligned with Europe.
Sceptics of the multilateral ideal would say that this represents less of a rupture from the previous order than it seems. The WTO’s predecessor was largely a like-minded club of advanced economies held together by cold war politics. As soon as the WTO itself was launched in 1995 and started taking developing country concerns seriously, the negotiating system ground to a halt.
To speak of a new order is itself somewhat misleading. In geopolitically sensitive areas there will be no overarching governance or legal framework, just coalitions or bilaterals of convenience with a bias towards politically friendly countries. This may not sound inspirational. It is, however, much more realistic than imagining that taking the knife of a traditional trade agreement to a critical products gunfight will end up in anything but defeat.
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